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Pennsylvania court rejects public-policy challenge to hotel sex-trafficking coverage
The court said coverage must be determined by the policy wording and the complaint, not by a broad public policy exception insurers did not draft into the contract.
Pennsylvania's highest court ruled that insurers cannot use general public policy arguments to avoid paying for hotel sex-trafficking claims, saying coverage depends on the insurance contract language instead. The case stemmed from four civil suits by people who alleged they were trafficked as minors at Philadelphia hotels, including the Roosevelt Inn, and sued the hotel owners and operators.
According to Insurance Business, the hotel operators held primary commercial general liability coverage from Harleysville, Nationwide and Samsung between 2011 and 2015, along with umbrella coverage from Ace Property and Casualty Insurance. Each primary insurer initially defended under a reservation of rights, and Samsung later sought a federal court declaration that it owed nothing, arguing that coverage would violate public policy because the alleged conduct would break Pennsylvania's Human Trafficking Law.
The trial court had sided with Samsung in 2023, relying on a divided 2004 decision, but the Third Circuit sent the question to Pennsylvania's high court. In its ruling, the court refused to read an implied overriding public policy exception into policies that did not address it, adding that defining crimes is for the legislature and pricing and risk exclusions are for insurers.
The court also emphasized that disputes should be resolved by comparing the four corners of the insurance contract with the four corners of the complaint, noting that act based exclusions are commonly written and purchased. It pointed to record evidence that Ace included an abuse or molestation exclusion that barred coverage for abuse or threatened abuse or molestation of a minor, while leaving the continuing coverage dispute unresolved because it assumed a duty to defend without deciding it.